Create Value: How to Test Your Offer

 

The Personal MBA: The Foundation of Effective Business

 

Lesson Info

Create Value: How to Test Your Offer

We're going to do this afternoon is finish up talking about value creation, so we're going to shift from all of these things we've been talking about how to break down and evaluate ideas now we're going to talk about how to actually test it. So how come up with something that you can show to a prospectively customer or client and get their feedback and see if this is going to be something that they're going to find valuable enough to pay for? We'll talk about how to test in test specific value creation ideas, and we're going to talk about marketing getting attention for this idea and selling, so converting a prospective buyer into someone who has actually given you money in some way, shape or form cool. All right, let's, finish up prototype ah, prototype is an early representation of what your offer might look like, and the best prototypes are designed to allow you to show this to someone who may legitimately be interested in purchasing what you have to offer and doing that in a way th...

at makes it easy for that prospect. Tio give you feedback on whether or not it's valuable so the best prototypes usually take on the same general form as the final product we'll be, so if you are making a physical product, you might produce a model. For a sketch, if you're doing a website doing a mock up without all of the back end programming, maybe it, um, if it's a service package putting together a one page piece of paper that shows exactly what people are going to get and how much it's going to cost and why it's worth it? Uh, usually called like a one pager or sell sheet that's a prototype? Uh, the more realistic that prototype is and the more detailed it is, the better the feedback you'll get from it. So if you just explain something about it, if you just explain something to somebody it's really hard for them to give you good feedback if it's tangible, if they can play with it, if they can ask you questions, if they can start to imagine them actually using this thing that they that you are describing it's much, much easier to get good feedback from them. So for best results, make your prototype match the final product what you imagine it to be as closely as you pop possibly can. So the purpose of the prototype doesn't need to be perfect. You can actually get in most situations. You can have a functional prototype in an hour, too the whole purpose is to have something that you can show to somebody. Who has some money and say, is this value valuable to you? Does this solve a problem that you have? And if it does, this thing that I am describing is this something that you would be willing to pay for it just a very short representation of what this thing is that you're trying to build now the whole purpose of a prototype is actually show it to people and get feedback. So one of the worst things that you could possibly do when you are testing a business idea is the term over the years has has been called stealth mode, right? I don't want anybody to know about my idea, because if somebody knows about my idea, they're going to steal it because it's so good it's so good that everybody is going to be flocking to this idea when it when it finally comes out. The major risk to you as a business person or an entrepreneur is not that somebody's going to steal your idea, become a mega zillionaire off of it. The main threat to you in early stages is complete obscurity, because nobody knows you exist, and if you're not talking to customers, there's a really huge risk that you're going to be investing a lot of time and energy and money and something that's not going to sell, right? So the example earlier of something like this happening in the iron law of the market anyone remember the segway personal transporter scooter irish thing that was invented by guys named dean cayman? Ah really prolific inventor has invented insulin pumps, medical devices all sorts of really good things the segment was really technologically advanced um there was a lot of new scientific ground that was broken in the creation of that thing um the trouble was they didn't show it to anybody who may be in a position to buy it before they spent tens of millions of dollars in the development of it right? So by staying secret they removed themselves from that feedback loop and as a result they missed the critical feedback that nobody wanted to buy ah, five thousand dollars alternative toe walking or riding a bike so what we're trying to do is develop a prototype and get to the point where you're showing it to people in getting feedback and improving upon that prototype as quickly as we possibly can. And the idea here is called the federation cycle excuse me so the generations cycles a process that you can use to improve anything over time and there's a little acronym I use for this called up wigwam, which is watch idea guess which act measure so first when you have this prototype and you're showing it to somebody you can ask what works what doesn't just get that early feedback and then come up with ideas. What could you test? What could you improve? What are your options on changing this thing in some way shape or form then for lack of a better term you guess of all of the things you could change or improve? What changer improvement do you think is going t create more value for your customers or an easier process for you? Then you decide which one they're gonna test decide which changed to make and then you act you make the change excuse me a frog in my throat that man is back all right and then you measure was it positive wasn't negative it is back should you keep the change or should you go back to the way it was? And the important thing to understand is that generation is a cycle it's something that you do over and over and over again. So this process of watching the world coming up with ideas choosing one, implementing it and testing it you do this over and over and over again. And the more times you go through this cycle the better your idea gets. So part of test part of the idea of testing a prototype is to start this cycle early and go through it as many times as you possibly can. The more times you go through, the more your offer improves, so the idea with generation velocity is the faster you go through the generation cycle, the more cycles you can complete in a given unit of time so the less time it takes you to go from finding something interesting in the world of deciding to test it, acting upon it, measuring it, getting feedback and deciding whether or not to keep that the faster you go through that process, the more times you could do it. So there's there's a great quote by eric schmidt who's the who was that the chairman and ceo of google he says our goal is to have more at bats per unit of time and money than anyone else if you contest you can learn very, very quickly the faster you learn, the more improvements you can make, the more improvements you make, the better your offer can become thank you very much now the trouble with generation or or this process and this is a common objection that people have to this type of testing is it sounds like a lot of work, right? I'm running a business here I don't have time to do all of this testing junk uh the trick is you know it it is extra work that is but it's important extra work because by doing this by going through the adoration cycle you find lots and lots of different things that you could do that will make your offer better sometimes way better go ahead, just jump into you know, one of the books he had recommended was a lean startup which ties in is this yeah sickly exactly and you know one of the things in using that in my work and with the recent software purchase that we've made to help facilitate this um it is more work but you also end up not wasting resource is by not going down paths that exactly don't add value so you know it as a cz we've started to use this has had, you know, paid huge dividends already just because you make sure early on that you're on the right path and you get that feedback quickly and it does it does make a big difference yeah have you ever, uh, read a magazine or a block post or something where they're talking about business found a way to double their profitability or improve their marketing by x thousand percent? This is how they got there right there's no other way to find those things to improve your business so much then to go through the federation cycle, do it well and go through it as best as you possibly can because if you're testing every part of your process along the way you will find things that make you way more profitable way more effective in every single step of the process you just have to accept okay now the whole point of this is to get feedback so let's define exactly what that is the feedback is what your customers or prospects telling you about what it is you're showing it to them right? So when you show a customer or a client or prospect of prototype what they tell you his information you can use to go through the adoration cycle once again so it's in your best interest too get to the feedback phase as quickly as you possibly can and make sure that the feedback that you're getting is as good as it possibly can be in order to go through the federation process again and there are a few things that you can do to make sure the feedback that you're getting is valuable the first is it's really tempting particularly if you're a new business owner and you're starting something from scratch really tempting to go ask friends and family first right got the prototype I'm excited I'm going to go ask my mom what she thinks go ask my friend my mom she's probably watching right now um it's really comfortable task friends and family about this right and it seems logical right? It doesn't take a whole lot of energy tio go ask people you care about what they think here's problem in general your friends love and support you and they want to see you succeed and so you'll get feedback like oh that's really nice that's really great we're excited for you that type of feedback does not help you. It feels good, right? That's why we asked for it, it doesn't help you go through the adoration cycle, right? What you need to know, particularly if this is a new idea that you haven't tested the market. You need to know whether you're on the right side of the iron law, off the market, for not, and so listen to really potential customers ask them for feedback instead of friends and family because you need to know if people who are not related to you or otherwise no, you in some way, shape or form are actually going to pull out their wallets and by this thing, all right, so listen to real potential customers also ask open ended questions so it's very tempting when you're talking and showing your work toe ask yes or no type questions. Is this valuable? Do you like block? And if they can answer with a yes or no, you're not getting very much information, actually, because you're guiding where that conversation is going. The very best thing that you can do, and this is when I was a procter and gamble um, I spent a couple of years doing product development and what we would do when we had a new product idea. Was describe it or show it in some way shape or form and then have lots of questions that followed the form like what do you think about a block or can you tell me about this thing that you do or how would you use this thing that we're showing you really open into questions that are very short and most of the time we would let the prospect or the client or the customer talk and talk and talk and talk in fact one of the most successful forms of research that we did I developed on home cleaning products which is way more exciting than it sounds actually there's a lot of science there's a lot of psychology that goes into how you heat you keep your house clean and one of the most successful forms of feedback that we did was find people who were willing to uh let us come in their house and watch them clean that's that we wouldn't say a word high go clean we just watch and you can learn a lot about how somebody does something by just stepping back and letting them tell the story instead of you trying to elicit uh very specific types of feedback sounds ok no also important common sense but important tio remember steady yourself keep hold because if you do this right the other parties should be comfortable telling you very bluntly if it sucks and sometimes it sucks so it's really it's it's a big risk? Because particularly if, if this is something really close to you that you really care about it's hard to hear from somebody like I never pay for that impedes junk, right? We're reading it is very possible to hear those types of things and if you back session, and so before going into a feedback type situation, building a little bit of emotional distance that if you get some negative feedback, what the other person is really doing is they're doing you a huge favor because you're being honest with you, they're giving you information that you can use to go back through the adoration cycle and make something that doesn't suck, right? So all of that feedback is good and valuable don't push that away, okay, so also take what you hear of the green assault, the customer, the client is not on mission, they're not perfectly representative of all of the customers that you are ever going to deal with. They're one big data point in the sea of money. And so if you start getting feedback in the very first person that you show your prototype too hates it and would never in a million years by it, don't let that psychologically wait your determination of whether or not it's a good idea. Until you've talked to lots of other customers, right? Because their perspective may not be the only one. As we talked about before, the very worst thing, the worst form of feedback you can get from a client or potential customer is right. Nothing apathy is killer. If you are in a feedback session, you get apathy. Be very, very careful. Um, people gonna hate it, that's perfectly. Ok, as long as enough people like it to make it worth your while. So if you're getting strong reactions that's actually a really good signal that at minimum, you're onto something okay, very best form of feedback that you can get when they should be the last thing that you ask in terms of in a feedback session, we buy it. Are you willing right now to preorder this thing or to write me a check or to give me your credit card? You don't charge them any money until it's available, what you want to gauge is are people willing to make the commitment of giving something up, and most people give something? I'm gonna talk about this in terms of trade offs unless people have to give up something to get what they want it's really easy to say, oh, yeah, totally do that. Yeah, this product is available are totally by one when you asked him a pointed question is like, ok, give me your credit card put place you down for pre or sometimes you get like, whoa, no, no, no, no I want to see it burst and you get some really good feedback that way we'll talk about an idea called barriers to purchase what's holding people from from really making the buying decision. Um, asking for the order in a feedback session is the way that you start to get that kind of josh quick question for the folks out there not here but also online when regional feedback right now, of course is our valuable information you get suggestions and figure out what's working and what's not working it sounds like for you is critical to get this feedback in person I mean, so easy to create a survey for one that you email out to a whole bunch of people where they have a big list or e mailing the family or friends. So am I hearing you say correctly do this in person with some focus groups rather than just being detached and sending a survey? Yes, so if you could do it in person fantastic because you get so much more information right body language you can go back and forth at minimum phone calls worked really well so I was actually about, say a month and a half ago talking with a software developer who's developing a program that he thought I might be interested in and was going through this process and just in the context of a phone call being able to go back and forth and ask questions and talk about what was working on what was holding me back and whether I was willing to pre order that back and forth is really important and you get some cues like tone of voice things like that random internet survey doesn't necessarily work unless you do something specific which we'll talk about here in a minute called a shadow test so if it looks like putting up a sales page for a product and tracking how many people pre order something like a kickstarter or something like a specific preorder campaign that works because you get to buy decision information how many people saw it how many people were convinced enough to preorder that's good information if it's just a random internet survey it's not really going to give you the information that you need to go through the adoration cycles as well as you need to good okay now as we were kind of talking about what is motivating people to make a purchase decision and one of the things that is tricky as as business people as people who are developing something for sale to somebody else is you can't really do everything all at once, right? You can't make it the best highest quality, most expensive materials ah highest and support and charged the rock bottom price for it right there are alternatives there are things that you need to do more of or less up and in general uh you should make those decisions based upon what your customers or what your clients actually value when it comes to making purchase decisions. And so this is an idea called tradeoffs and a trade off is a decision that places higher value on one of several competing options so you can't do everything your resources are limited um your customers are making trade offs in terms of if they buy one thing, they can't buy another thing so they're making decisions based on what to buy and what not to buy and you should be looking for patterns in the types of tradeoffs that your customers tend to make around things that you're offering. So for example, there's a really great book actually by the name of love tradeoff and I don't remember the the author's name off the top of my head but makes a really interesting point that the tradeoffs that people tend to make when making purchase decisions is they will uh, choose fidelity so having a really high quality experience where they will choose convenience having a faster having a cheaper and if you can anticipate how your customers are going to make the trade offs you can make the choose the alternatives in the value creation process they're going to give your customers mohr of what they want and this idea it's called economic values, so when people are making trade offs and you're you're looking at the alternatives and developing something of value, it helps to know what people value economically, what people actually value enough to pay more more for or to make a buying decision or not. And this, uh, is also just like the ten ways to evaluate a market. This is a checklist that you can use to help make some of the trade offs that need to be made in the product in the offer development process. And so there are nine common economic values. The first is efficiency. How well does it work? Speed? How quickly does it work by liability? Can I depend on it? He's abuse? How much effort does it required to get the result? I want flexibility is how many things does it do status going back to status seeking earlier? What does it tell about me? Two other people aesthetic appeal. How beautiful is it? How aesthetically pleasing is this thing? Emotion? How does it make me feel when I use it and cost? How much do I have to give up to get it? So in general, people are willing to sacrifice one of these things to get more of another value that they care more about, right? So for example, um let's look at something like the hotel industry you can either stay in a low end hotel not very fancy not a whole lot of amenities maybe the rooms are just beautiful the location isn't is good, but you know what it's cheap and it's convenient so it's a good option other folks may make the tradeoff is they may be willing to pay enormous sums of money to stay in are really, really fancy hotel with lots of amenities and great rooms and great location and great service and all of those things right there is a continuity there, and so you can start to see how the very same type of offer hotel room lodging this is the beginning of all calm market segmentation different people have different perceived values on different aspects of these economic values, right? So it's not just choosing what it is that you're offering, you also have to choose how you're going to offer it and what economic values are you going to emphasize in the creation of a product or service or shared resource or other form of value? And which are the ones you're going to de emphasize because you can't do everything right that's? What makes your offer unique how you make these tradeoffs is what makes you you and you can choose to doom or of one thing and less of another, and that affects the type of people that you will market too and affects the people yourself, too any thoughts examples of of seeing this in action I could definitely safer in wedding should be something that you know, with the educating appliance deal with a lot where people want really great photography to happen in a short amount of time, never really cheap, right? Which won't happen, so you have to go towards the well you're either going tohave a small amount of media oprah photos, a family sheep or if you take a little bit longer time, you'll get more skilled photographer it's going to cost you more but it's going to have a longer lasting appeal because everyone who goes into your house and sees your pictures on the wall, we'll see the aesthetic of the photos and think of you like, oh, she can afford in my photographer, she mightiest, she must have some status but it's a definite what you can't have it all. Yes, I'm glad you brought that up that actually leads very well into our next point, which is called relative importance relative importance is the idea that when people are just talking about something, they tend to want the perfect I think right, I want the perfect the doctor. I want awesome photos really fast, super cheap. I want them delivered immediately in this beautiful package. I wanna pay two dollars because that's what I want and if you ask people in the abstract if they will be happy with anything else other than that situation also, you know, needs to be perfect. I'm not gonna be happy, then they actually go out and start talking to people and hiring a photographer, and they will hire somebody who is not perfect, right? And they will make some tradeoffs. They may spend a little less, they may sacrifice a little bit in quality or reliability or speed or whatever, but they will make a choice in general as long as they're delivered. The result will be happy with it. So relative importance testing is the idea when you're getting feedback, if you just ask about things in the abstract, people will tell you they want everything, but we know the real world trade offs on alternatives are effective life that have to be made so relative importance testing is the idea that you can actually figure out the tradeoffs that a potential customer is going to make if you ask them to make the trade offs explicitly in the feedback session, right? So don't say they can have everything. Give them a way to tell you how they're going to make the trade offs really good easy example of this let's say well, let's use photography is an example let's say you have a list of ten different things of photographer could be right low price, high quality photos two day turn around just make a list of all the things that a photographer may be able to deliver, right? Give them a stack of one hundred pennies and say you can allocate these pennies to these ten criteria however you like but the ones that are more important you should put more pennies on right? They can't put a hundred pennies on all of them because they don't have enough right that have to make a choice, right? So there are lots of different techniques to do this in the scope of the feedback psych session that's a really, really simple one that's that's pretty easy for everybody to do. There are there are market research firms that charge tens or hundreds of thousands of dollars to do very complex statistical models that look at relative importance, but the idea is the same if you don't ask people to make tradeoffs they want, but if you ask people to make tradeoffs, they will give you much, much better information to help you improve your offer whatever it might be that make sense now critical assumptions our fax and characteristics that must be true for your offer to work so every single business has a certain set of things that must be satisfied in order to continue operation so let's take a let's take a service business um what's a service business that you've you've patronize recently she's store shoes perfect we'll product business but yeah perfect example ok in order for the shoe store to remain in operation what must be true yeah, they have to have some shoes to sell right if they're not if you have there not a shoe store right, so they have to have stock the doors have to be open right employees now they have to have a certain number of employees or people to help customers coming in people have to want shoes people have to want shoes like some new thing can't just come along and like totally replace shoes for everyone totally yeah so so we shoes or an expense employees or an expense we've talked about a store which is an expense, right? All of those things are costs, so add up all of those costs and spread it across a monthly basis and you have a minimum amount of revenue that has to come in every move for that short shoe store closes right that's a critical assumption if the store does not sell x number of dollars worth of shoes in a month it's in trouble okay, so we were talking earlier about james in the plastics recycling fuel business what was the critical assumption for that business the and will the entry little cost was was a critical element um and what I had to determine was how much would I have to sell in order to make it make sufficiency? Right? Yeah and particularly for businesses that have facility costs, equipment costs and employees employees don't generally take it kindly if you don't pay their paychecks in a given month you miss one month in your business is done because everybody leaves right all of those things if you can't anticipate what the critical assumptions are before you start the business or before you offer the service or the offer whatever it might be you can start to ask yourself the question that we asked ourselves earlier what would have to be true in order for me to fill this critical assumption, right? So for example, our hypothetical shoe store if the businesses overhead is fifty thousand dollars a month, you can ask yourself the question how many pairs of shoes at our average profit margin an average profit when we have to sell in order to to make sure this critical assumption is true and you can start to back up to see what would have to be true, what would I need to do in order to make sure this business is a success so you can use it as an evaluation criteria as well is a way of saying, what are the things we have to get right right away? Or we're done it's a really good way of focusing on the things that are most important and not focusing on things that really aren't like the number of twitter followers you have, right, since no one good way to do this with products or things that don't exist yet this idea we talked about a little bit earlier let's go to planet now called shadow testing in shadow testing means selling an offer before it actually exists. So let's say you have an idea for a product let's say that product is something that you need to manufacture, and you need a factory production line to do it really great, tangible example of this anybody seen that fit that personal tractor thing, right? That company developed that from scratch. Developing electronics is expensive, particularly if you've never done it before, right? So they had this idea. I didn't know whether or not it was going to work so here's what the dead put up a web site that here's the thing called if it bit awesome here's all the benefits, if you're interested here's how to place your pre order just put a website up, they made it very clear. That it didn't just exist yet, but if there was enough interest, they were going to go through the steps of making this a real thing and they would deliver it to the tall they're paying customers your lab and thousands upon thousands of people preordered this thing they took that money actually took, took actual orders, use that money to look for production line and do all of the things that was necessary to produce it as a physical product. They also took that demonstrated customer interest and went out and got capital investors to get the millions of dollars it was going to be necessary to make this thing a real thing, and they were able to do that because they started selling something that didn't already exist, right? That's why preorders work it's a really great way of allowing people to raise their hands and and put their wallets on the line saying, I am interested enough to buy this thing if you could make it for me, if you can do that, you remove a lot of your risk and developing something new that won't work. That makes sense for every month we do a pop up dinner, we do that's a new shadow test because it's, we're asking people toe toe put in their credit card number before before. Something exists and what happens if if you don't get enough interest that we have to give them back their money given back their money and you'll have it nobody's really out anything aside from the time that it took to do the test and that's the really great thing about shadow tests you could with a simple enough offer put up a test of this afternoon and as long as you show it to enough real people tio get an accurate gauge on interest you can validate market demand in an afternoon as long as you can show it to enough people that make sense any question from the from the live audience about this stuff good? Yeah actually there's quite the buzz going on right now in the chat rooms and specifically about kickstarter yeah, they're wondering if kickstarter is a perfect example of shadow test their entire business is shadow testing and, you know, it's interesting kickstarter just just came out within with an essay or a policy saying we are not a story like this is not a retail establishment or a reseller. This is a place to back projects that you want to exist, so when you go on kickstarter you find a cool project it doesn't exist yet is just somebody putting it out there saying I want to make this thing if you want to raise your hand and put dollars on the line and if we get enough interest will make for you so yeah they've built an entire business out of shadow testing now kickstarter is a really easy way to do it for for some types of products um for other things it's actually better to run the shadow test yourself actually kick started takes a percentage of the money raised that's their model um the biggest thing is putting the idea out there every kickstarter page is basically a prototype right it's a rendering in a video in a way of showing you what this idea is and getting you excited enough to pre or if you're into that works good questions nothing we mention a little while ago was that the lean start up method and question that desert eagle has and this may be a little insider baseball requires some explanation but when it comes to to shadow testing would a b testing be smart to do with their preorder landing page um yes beyond a certain point so maybe break down first kind of a b to a b testing is is a way of testing marketing and sales activity by showing certain groups of prospects or customers different information engaging the difference in response rates it's a really effective way of optimizing your marketing and optimizing your sales uh for an early shadow tests the only real feedback you're interested from the beginning is are enough people interested in buying to make it worth it if you validate that and you and you build out your sales copy into more of a full marketing and sales process, then you start a b testing, so just I just want to share the difference between kickstarting chatter testing of course, with the kickstarter you do make a donation and so in the case of of it completely falling apart and you're on the money and you're out the money rather, whereas in a lot of shadow tests you returned the money if you didn't cry before it's a scam versus yes, and and there are, uh, plenty of examples of kickstarter projects that had enough interest to be funded uh that were actually harder to manufacture or otherwise produce than they expected and never saw the light of day, so that is ah risk specifically with kickstarter, but if you're doing it on your own, all you need is the ability to take pre orders, and there are a lot of merchant companies that can help you to pre process credit cards and store them not to be charged until you can deliver there's all sorts of technical ways tio actually make this happen. The rial essential element is our people raising their hands and putting their dollars on the line saying, I want this thing if you can make it for me, I've used the software unbound pages dot com yes, sort of that, yeah, that works really well. Do a shadow tested for testing and the baby, and you could see how many people are loading it super user friendly. If you don't even know anything about html, you can build a website, they are landing page, at least in the elements. If you're selling directly to individual purchasers, a really quick, simple shadow tests that you can do it's a little softer than a purchase, but put up a landing page with your prototype for a video or whatever. Just ask for an email address if you're interested in this thing, put your email address in and the number of people who visit the page versus enter their email address is a really good gauge of how interested people are if they're not willing to give you their email address, they're not willing to give you a credit card, right? So it's it's a little less accurate than actually asking for the purchase, but if you're looking at something that you could do really fast and dirty, that gets you close. That's the best thing to do? Alright, doing shadow testing are you ever concerned about creating competition from shadow testing? If you have a great idea, and specifically mark reynolds is asking, is there some way to protect your eye idea while shadow testing? It is this is going back to the getting feedback versus obscurity idea it is way better for you to collect as much information as humanly possible versus being really, really difficult are really really scared about someone stealing your idea so in general it's in your best interest to go from idea to something that exists in the real world as quickly as possible and ideas air really easy to think about it's the execution of those idea is that the hard part? So what we're doing here is helping you get from that idea to the execution point as quickly as possible that's way more valuable than protecting the idea great thanks for clarifying that you're ok now minimum viable offer is the smallest amount of value or delivered benefits that is necessary in order to produce a sale so for so when you start with the prototype and you go through the adoration cycle you improve and improve and improve and improve and improve and at some point you've produced something that somebody is willing to pull out wallet, checkbook credit card and actually make a purchase right so the minimum viable offer is that minimum offer that somebody is actually going to be be willing to buy and the whole point of the value creation process is we're trying to go from initial idea to minimum viable offer that is successfully selling in the marketplace as quickly and inexpensively as we possibly can right so anything that you could do too short in the process of going from idea to something that you are selling is good because it helps you validate the idea gets you producing revenue as quickly as you possibly can because remember, all the things that we've been talking about have been involved have involved spending money right? You're spending your time you're spending your resources, you're doing a lot of work we're not to the point of being paid yet, right? You start getting paid when you have at minimum a minimum bible offer that selling to folks right? This is the whole point of the of the offer development process, right it's crazy important no hope this whole process that I've done in the dark build a product and then pushed out yeah, nobody wants it and you're like the cannon phone have you heard of the phone? And microsoft is that well, they put they put out a phone that was it was not a phone, it was just internet device it's like literally like this big they spent a billion dollars developing it and was on the market for six weeks took it off it's like that was very similar to your, um, scooter example and that's that's a really good example of something in a billion dollars is a lot of money and if you can prevent spending a billion dollars why just showing it to some people and asking them if they're willing to preorder that's a pretty good tradeoff to make versus secrecy, right? So the whole point gets a minimum viable offer as quickly as you possibly can now you don't stop there because when you get to minimum viable offer you have something that's selling but the generation process just keeps going right? Because you can still do the same thing you could notice what's working what's not come up with that idea and test that idea and gather information and decide whether or not that change was a good thing, right? You keep doing that, so the idea of applying that process to a product that already exists is called incremental augmentation and it's just making something better over and over and over again and the same ideas of the adoration cycle in federation velocity apply use make it better and better and better and better. So if you're worried about competition spending a lot of time making your product better is the very best thing that you can do to make sure that your competitors can't touch you, right? We're talking a little bit about apple earlier of all of the technology companies that are out there, apple probably spends the least time studying and imitating competition right? Why didn't you? Why? Why don't they need to? Because they're more energy of it in innovative and able tio they just keep making cooler stuff that people want. Incremental augmentation is the technical term for making cooler stuff to people and that they spend their time doing that and because they spend their time doing that it's really difficult to compete with them because instead of really hyper focusing on competition there, just making more stuff to one if you're into that kind of base yeah, exactly questions about this so what's the limit to this like this a pretty sound principle in terms of, like getting like some part of your a product or offer out there to test it to get knowledge beforehand. That's, you know, pretty sound, but I cannot. But then there's some exceptions where it's, just like you have to have the full thing out there is really kind of noise around it is there? Are there any concrete examples there, like someone counter pencil to this? You, if you are developing something new from scratch, even if it's related to something you already do, you kind of have to start at the prototype phase and build up to minimum viable offer all the time. So what I what I see a lot of companies make really huge mistakes on is getting through this prospects process successfully once and then deciding to do an offshoot products kind of in the same market and they go they don't go through this process that they just like microsoft launched this billion dollar thing that they've never tested before um in a plops because they didn't get that feedback or go through the process from the beginning so even if you're experienced in the marketplace it's really valuable to start at the prototype stage it arrayed up to something that selling if what you're doing is really new start from the beginning that might answer medical devices would be about yes, right? Yeah, I mean there's something where you know, going back to the definition of what is the minimal and minimal viable offer if you're doing a medical device that minimal requires a lot of work right and it's important work so it really is dependent upon what it is you're building or what it is you're offering um it's just a minimum is the threshold where people actually pay money for it. What? It's uh like a service base um business where your prototype is just what you're offering your clients it's not mess is there really a a tangible something for example like say housecleaning like to make to differentiate yourself from your competition church so you can be like apple where you like it doesn't matter what you're doing because what I'm doing so awesome like there's only so many ways you can scrub somebody's toilet right? How do you make house cleaning cool enough that you don't have to worry about the competition or is that kind of no that's that's going back to the idea of modularity and bundling and unbundle ing coming up with service packages that include or exclude certain things is how you do that. So for example, great example in the transportation industry is uber anybody seen uber cab services? So they bundled something that's really boring taxi service getting from point a to point b and they made a service bundle around it, right? So it's an application that already has your payment information so you don't have to have any cash you're charged automatically, they have water in the car. They show you exactly where the car is and do all sorts of things around the idea of getting from point a to point b that makes it very unique and valuable and you pay more when you hire an uber cab versus a regular taxi, but to a certain customer that values convenience, those things are very valuable. So aa lot of service industries um well bundle in extra services that are either done or not done frequency is a big thing or a subscription or there's lots of ways to play with it t come up with something unique the minimum viable offer is unwilling to clean your house if you're willing to pay me money um but there are lots of things that you can do around that to make it more or less valuable to certain customers ok, yeah, I think about sitting someone's house I've seen some interesting things on the internet what people will do when they come clean your house so they found some creative ways around that what they were and what they don't wear service bundling but you know, um here's a question for you coming from I o s I don't know if it's serious or not asking this question um and this is like, I'm a consistent theme so we're talking about you just mentioned uber example and mission some services, those type of things but how does this tie in for for service based businesses like graphic design or or photography? Yeah, well, a lot of it depends on whom you are serving as a designer or as a photographer. So you know, a fashion photographer versus a product photographer versus a package designer versus a product like there's there's a lot of granularity there so it's really who are you serving? What do they care about? How can you add an additional service or do something a little bit different that helps your clients or customers get mohr of what they care about and can you bundle it or unbundle it in a way that makes it exciting for them? Another question in from the internet from sound cox in loveland, colorado he s in some fields do early customers expect free updates when you augment your product? Yeah, it depends on on the industry and you can set that expectation in the pre order or not so if it's a if it's a subscription type services the rule of thumb is typically updates are included if it is a product type business um usually you pay for the updates so really great example of this is adobe with their software if you buy the package is a software package you buy in addition, that edition is when they come out with the next edition you pay for it again if you pay them on a monthly fee for access the access is updated is as new versions come out it's kind of bundled into the cost of the subscription alright last idea in value creation okay, which is an idea called field testing and field testing. It means creating using and iterating you're offering before offering it to customers. And the way you do that is by being your own best customer and using the stuff that you create for yourself. So there is a the case study that I use in the book there's a wonderful company just outside of denver called a cab far ooh and they make backpacks so really intense hiking, hunting massive gear frame backpacks crazy high bill quality quality crazy expensive so what makes the company unique is the founder of the company spends half of the year not in the office he actually lives in the colorado backcountry and he takes one of his backpacks he takes a bunch of fabric uh needle and thread and staplers and he lives in the wilderness creating new prototypes for backpacks so he's hunting and fishing and doing all of the things that cafaro customers do with the backpacks and he is inventing new backpacks in the field. So by the time he comes back to the office he has a prototype designed that he's tested for weeks potentially months doing the things that the backpack actually needs to do right that's one of the reasons that these backpacks khun b several hundreds into the thousands of dollars and for a certain type of customer it's really, really, really, really worth it. So by testing it yourself, you can think of it as going through the adoration cycle really, really quickly because if you're using it, you can notice things that really sucked that need to be changed and you could make that change really quickly, right? So being your own best customer doing your own testing helps you get to the minimum viable offer point faster and helps you augment your product or your or your own offer when it comes out that makes me think of the other backpack company thirty seven signals but yeah they always talk about they build them their self worth for themselves yeah and it's when when you are using your thing on a daily basis it becomes really clear what's working what's not so it doesn't apply for all sorts of businesses so for example in the insurance business I can't really feel tested on yourself doesn't it doesn't work that way wedding photography doesn't really work that way you could probably inspect your own home if you wanted to yes um yeah I mean there's there are all sorts of different ways that you can do it the best is you can if you can stand in the shoes of a client or a customer if you have that opportunity to do it you learn a lot that way just quick question for you over here all right so as you're doing things like field testing and you know building building some shadow products you haven't examples or are there some situations where people are doing this and they're realizing wow I thought I was targeting this customer but it's actually this person this some actual market all the time all the time and it's um either field testing and really understanding the strengths or weaknesses of what you're doing it in a new way or a lot of times you get this in the feedback stage two it was like you go in expecting the feedback from this certain type of customer to be really good and it's really mediocre, but this other group kind of freaks out because it's awesome that's the benefit of doing all of this this testing and having a prototype because a lot of those things I mean, the one thing is customer or prospect feedback will always surprise you just guarantee it as a rule of thumb, it will never be exactly as you expect, and so the value is if it's never going to be exactly as you expect, you need to get out there and start talking to people because the faster you get out and talk to people, the more accurate your beliefs and predictions about this offer is going to be what is it inherently so challenging about talk people? I mean, I know it's scary how much money was all the time with my business? And I talk to people think about myself and others for some reason people could be brilliant do allowed different things, created a product services, but for some reason there's a disconnect between I'm going to make this phone call, I'm going to call it a perspective colored customer josh, and see what he thinks what have you found there? Consistent thread? Why were so afraid? The read the possibility of rejection is a really big deal and it's it's a bigger deal than then we're likely to admit even to ourselves right? So if you're we've been working on this thing you call up somebody and they tell you that it it sucks like that possibility doesn't feel good at all and that could be a really really big barrier um the thing that always always uh helps me thinking about this is if your idea really is terrible it's better to know that sooner rather than later so you can go on and do something that's actually cool right? So even the possibility of negative feedback if you get it just just think of it as that prospect is giving you huge gift they're giving you valuable information that you can use to make something really cool and if this idea doesn't work out there are hundreds of thousands of other potential things that you could be doing with your time that are highly likely to so you can stop doing what's not working and start doing what isthe cool I think quick question if you're very quote about him henry ford quote, if I if I listen to my customers I would've built a faster horse yes what how does that play into this um a couple of things so that is true people tends to give feedback based on things that they can visualize or that they already have some experience with however even henry ford um back in the day if you would have shown a person of course and a car at the same time for this needs a which would you prefer? They prefer the car, right? So a lot of that is if you have a really new to the world idea that you think you can make happen, get to the prototype stage as quickly as it possibly can and then give people a choice and see what they do so over so car versus horse, no contest segway versus bike there's a decision to be made there and a lot of people chose the bike and it would have been valuable to the company to know that upfront before investing ten million dollars in the creation of I guess the balance is you can't really get a new idea by looking at the crowd you couldn't just invent the car by look looking however unlike sources bones, you have the idea once you have god then you get a sore point you can show people because that's the end is bringing it to other people and the big thing is as business people we are in the business of solving people's problems really? Yeah, exactly it's like so what? What is the need or the want that needs to be fulfilled? If you have a better way to fulfill that need fantastic, develop it and test it but in the end it's going to be the market that decides whether something is valuable enough to continue to exist so we're just trying to get to the point of getting there's quickly as we possibly can great question in from the internet just now j read from london uk asked if you're in the information business like you are giving courses how do you best protect your information offering during the shadow testing slash immigration stages so easily duplicated after all you you know you might lose your usp knowledge and does that make sense? Yeah it does and the honest answer is I don't worry about it very much because in terms of information it's very easy to share it's very easy to spread you can't contain it if you try and so I don't try and what is what's really nice about that is so if somebody is is interested in looking at the book for example and they really for whatever reason don't want to pay for it they're probably not going to they're probably going to go to a torrent site download it and there's nothing that I can do to prevent that writes the whole book um since there's nothing that I can do to prevent it what I have seen is that people who initially weren't inclined to purchase going download the book and they read it they find it valuable and then they go and buy it later and so it's, a form of marketing for me. I don't really worry about it too much. Um, the danger talking about this earlier, the danger is is not so much, um, that you're never able to sell your stuff. The primary, dangerous obscurity. And so at least they're downloading your stuff in learning for me, that's. Valuable.

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